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tv   Bloomberg West  Bloomberg  April 19, 2015 3:00pm-4:01pm EDT

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emily: from pier 3 in san francisco, welcome to the best of "bloomberg west." i am emily chang. every weekend we bring you the top interviews with the power players in global technology. we begin now with google, as the european union slapped the company with a formal antitrust complaint. how did it come to this? it all started five years ago when the eu began investigating google search practices.
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google started to settle, three times to no avail. now the eu has filed formal antitrust charges against google calling it a statement of objections. accusing google of being anti-competitive. for instance, when you search for an item, like a laptop google search results come up and are prominently displayed. >> today's statement of objection on comparison shopping is limited. it is the first place where we got a complaint. first, we got a complaint that google is favoring its items in search for a long time. however, we will continue to
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look at google's conduct in other areas. emily: they also opened a probe into android and she is still investigating search results for hotels, flights, and maps. google controls 92% of the search market in europe, compared with just 75% here in the united states. in response, google is not backing down. they say, while google may be the most used search engine, consumers and competitors have proven to widen the mark. in 2013, they launched a similar investigation but closed it. without taking action. not so in europe. if found guilty, google could be fined as much as 10% of its revenue.
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still, legal experts believe such a fine is highly unlikely. i spoke with a antitrust lawyer, and a former coo of google europe. in our own editor-at-large corey johnson. >> this is been going on for quite a while, it is not a new revelation. the statements of objection are relatively bland. so we will see what comes out. i think a lot of it will come down to is google dominant, and hdo they abuse that dominance? if you look at a universal search, if you look at how people shop for hotels, consumer electronics, credit card banks etc., they use mobile apps. vertical specialist sites. google is not part of that process. for example, yelp says 40% of their restaurant bookings come straight through their app.
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number one, are they dominant and number two is are they abusing it? google will always say, how do we give consumers what they want? to my knowledge, knowing the people at google and the way they were, i don't think they would have said, let's place our products first. they would have said, consumers seem to like vertical specialist search. let's change our format and see if they like it. before handing back to you every time google makes product searches, and changes, there are no surprises that people have been hit and complained. the question will be, whether it is based on their dominance and if they abused it. emily: how serious is this allegation against google? how serious is it that the eu has ratcheted this up to formal charges? paul: i think it is just an interim stage, this marks the
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end of the first phase of the investigation. where the commission looks at the preliminary point of view. the statement of objections is a short surmise of where it has gone to in its investigations. now google will have the opportunity to go into its side of the case in more detail. there is no finding in liability. it is the direction of travel in the commission's thinking. we do not have a conclusion in terms of if there should be a fine. if there is a fine, it could be up to 10% of its google worldwide turnover. this is very much and interim stage. i think it is fair to say it is serious and google has been trying to settle this through forms of commitments. unfortunately, that has not worked. they may have to offer concessions, but unlike the fcc, it has not been able to close it by that channel.
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emily: in the worst case, how could this hurt? corey: there are obviously $5 million at stake. i looked back at the google ipo today and it said they were unbiased. people believe google will give them accurate search results. if you typed in a flight you will get these results across the internet. i did a kayak search and a google flight search and guess what, i found cheaper flights on kayak. flights that google was not getting a piece of. that says to me, the real risk is that the information is sometimes biased in terms of google favored results. not the best deals for consumers. that could hurt more than $5 million. emily: ben, what is your reaction?
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ben: my reaction is that they may become irrelevant. if they do not do a better job they will become irrelevant. it is a proven fact with lots of data with desktops and mobile, less and less consumers, especially sophisticated ones are starting their search journey with google the cause of, for example, but corey just said. finding better deals etc. elsewhere. so i think google has an obligation to its customers and shareholders to improve its results. that means improving formats. more choices. more images more ability to sort and filter the way kayak does and etc.. otherwise, it will become irrelevant and start declining at some age. kayak is still winning, so why would kayak worry about google
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if they are still finding better offers? google needs to keep improving google probably wants to do more of the same rather than lose its battle. coming back to the $5 million fine, i think the fine as far less wanting to google than -- less worrying to google than saying, you cannot do vertical search. that would mean the google experience would get worse and worse compared to the virtual search specialist overtime. i think the fine is far less worrying than google having to stop innovating. emily: paul, paint the most dramatic scenario. does google have to breakup in europe? paul: i don't think it could come to that. it is a behavioral investigation.
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it could be that google would, in search of a concession, although unlikely, it could offers some kind of formal breakup for the commission's concerns. but i think as your guest said the most worrying aspect is that google will be forced to comply with the legal precedent. emily: paul, ben, and our own corey johnson. well, up next, hillary clinton is in the race for the white house, but the digital campaign for president will be different from the last time she ran. her former senior adviser joins me next. and later, how will social media be a game changer in 2016? that is all coming up on "bloomberg west." ♪
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emily: this is the best of "bloomberg west," i am emily chang. she is in. hillary clinton has finally announced her candidacy for the white house. the response has been overwhelming with over 500 million video views in the first hour of her video. how big of a rolet will to play in her campaign? i spoke with alec roth, her former senior adviser and asked what his involvement would be. alec: i think she wants support for her presidential run. when we connected, she was in ohio on her way to iowa.
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very excited about her new presidential run. emily: how did she feel? alec: the rollout has been a huge success. i mean it is kind of an and is actually. you know, they came out with this new video, and within the first 18 hours, it was viewed 5 million times. now, one of the other presidential candidates is rand paul, his video had been watched 250,000 times. so, you know, i think 20 times as well as the next tech savvy candidate is not shabby. so she feels pretty good. emily: do likes and followers on twitter and facebook, do they translate into votes? alec: we are far past the days of ronald reagan doing a perfectly executed campaign event with the flag positioned just so, and then he shows up
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again three days later. you have to have a continuous dialogue with the american people. you have to educate them about who you are and why you are running. that is what really matters. the 5 million video views matters in so far that 500 million people listened to what she had to say. emily: using social media is a given these days, yet she literally just joined facebook. she already is doing quite well but it she joined twitter relatively late. why has it taken her longer than some of the candidates to embrace these platforms? alec: the biggest reason was that when she was secretary of state, it was a lousy job to use social media. in diplomacy there is so much nuance, so much attention given to every little comment, every little semicolon, it did not lend itself to liking and unlike in. i was with her at the state
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department, and i was all for diplomats using social media but i do not blame her for not using it personally during her four years inside the state department. emily: how big are hillary's challenge is going to be in a all new republican landscape? alec: in 2008, obama won because he figured out how to use technology effectively. in 2012, the republicans were still fairly incompetent. mitt romney's technology platform broke down on election day. that is not going to happen in 2016. whoever the republican candidate is, bush, cruz, paul, they are all technology -- technologically savvy. i think will be a challenge for
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hillary in that they are going to be competing fiercely with her, and whatever democrats run against her in the primary as well. the well where i was the importance of technology from day one. emily: what is her mindset when it comes to leveraging technology, leveraging these new tools? obviously we thought different kinds of campaign announcements, what else? alec: we will see which tools get used, we will see an unprecedented use of big data in this campaign. social media was defining any 2012 race, i think it will make a big impact. emily: alec ross, former senior advisor for innovation at the state department. the 2016 candidates are already sparring over twitter and youtube, but when it comes to tech and politics, campaigns including marco rubio's are already investing and big data to learn more about competitors.
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i spoke with someone who has seen firsthand obama's campaign. dan: i think rubio's approach is really clever. he is going up against a incumbent who has a huge amount of technology behind him. using the strategy of his father in brother, they are planning to raise money through traditional means. rubio's strategy is about raising money from investing in areas where they can have a big impact in terms of efficiency. that is how it data will help. emily: areas like what? dan: i think in particular around fundraising. if you think about where the campaign can spend their time, certainly as a candidate going through and doing traditional fundraisers in hotels will bring some money, but if they can use optimization and testing to improve the effectiveness of
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their website and online presence, that can raise money through small donors. emily: what is more powerful big data or money? who would you rather be? >> big data is a way to become big money. if you look at the history of the hillary campaign versus obama in the primaries in 2007 the first quarter, hillary used traditional means to raise slightly more than obama. through many small donations obama was able to beat a traditional big fundraiser. emily: former head of analytics for obama's 2008 campaign, dan. aol thinks it can one-up google and facebook with its newest ad technology. tim armstrong explains how,next. ♪
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emily: this is best of "bloomberg west." i'm emily chang. aol is taking aim at google and facebook with new advertising. on monday, aol unveiled a new ad platform designed to help advertisers figure out how to spend their tax dollars. it will allow brands to measure the effectiveness of their apps across all formats. corey johnson spoke with aol ceo, tim armstrong. corey: what is happening today is the biggest food at in -- biggest pivot point in media from the way traditional media was done to the way it will be done in advertising which is the targeting of advertising in a much deeper l -- level across mobile internet, ott. today's lunch is probably the
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forefront product for the next generation of internet advertising systems and i think as you just described, it is the most powerful time for marketplaces in the world. i think aol is stepping out as the most powerful futuristic marketplace. it has been five years of work. it is exciting externally, but our teams internally are more excited. corey: you guys have done so many acquisitions of little companies, is this the stitching together of all technologies in a single platform? tim: we made some really large bets before anyone else did. when you think about those three areas overall, we have knitted together both aol's historic platforms together with some of the most exciting acquisitions i think in our space. so if you take a step back, aol is a top player and video.
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most distributed content on facebook, for social, no one has a more advanced system then aol. and, i think the stitching together of our strategy has been important. we have not changed in five years. it is a 20-30 year strategy in front of us. corey: when i think about this i think about what clever marketers do. i had the ceo of carl's junior on. they recognize they were not mcdonald's so they wanted a particular ad that would reach a young male customer. they were clever the way they reached tv markets and markets on the web. again, going after that demographic. but, it sounds like what you're
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talking about is the shift from demographically focused advertising to results of focused. tell me how that might work in a real case example. with a real advertiser. tim: if you are into it, which is one of our partners, they are taking advantage of a singular trends, which is media was built in bulk and since to -- sent to consumers in bulk. now, it is being built on a singular basis in many cases and sent to consumers on a singular aces. we are in tax season right now intuit can talk individually to consumers. when you think about it, the future of connecting with people will be on a singular basis. that is why social networking is important. our platform is the first platform to take advantage of these singular nature of singular content going to singular consumers.
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when you look at a recent tv statistics, the fact that almost all human beings are walking around with machines in their pockets that are essentially as powerful as a cable box, all of our systems are built to essentially deliver high-quality content and high quality advertising in a similar way into everyone's pocket and that is going to be a very significant shift for the entire media and internet business for the next two or three decades. corey: how can you track and add on a smart phone? tom: mobile is about device targeting, for us we have about 100 ilion devices in the united -- william devices in the united states that we recognize and understand and can cross-link between mobile and desktop. that creates a very powerful union if you think about the way
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consumers consume media, on digital, on a broadcast network, or maybe on digital. and today, we can cross format target you in general. it actually makes what cookie targeting was in a more powerful way. because it is across devices. so, when you think about advertising in the future, a lot of people think technology will deflate ad prices over time. i would make two bets. one will get better and more creative, the second is, ad prices will go up. there are a lot of ads and you do not know how they work. and people still spent $600 billion. imagine how much they will spend when you know how each add to each individual consumer works. emily: tim armstrong with corey johnson. hundreds of commercial planes well, could be vulnerable to hacking according to a new government report. we talked to one of the researchers behind that report
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next. ♪
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emily: you are watching the best of "bloomberg west," where we focus on innovation and technology. in-flight wi-fi connects travelers to the outside world it could also give hackers a way into planes on the computer system. the government accountability office reports that hundreds of commercial planes could be vulnerable to cyber attacks. many modern cockpits rely on the same wi-fi that passengers use. a hacker could commandeer a plane and shutdown systems. how can airlines and faa keep hackers out of the sky? i spoke to dr. gerald billingham.
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>> i think it is important to understand that we are talking about the potential for this kind of intrusion to occur rather than saying that this is an imminent threat, because faa is in fact taking precautions. we are talking about the future as more and -- aircraft become more internet dependent. emily: how exactly does it work? if the plane is on cabin wi-fi connected to the cockpit system, that is where you see the vulnerability? >> the example he gave is, in the cabin, passengers have broadband available to them. they can upload a program onto their computer. if that program has malicious software in it, and again this
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is important, if in fact the ip connection on the airports is able to connect with the cabin and avionics, then you have the possibility. right now what happens is there are firewalls that prevent that kind of incident occurring. keeping in mind, firewalls are software too. up-to-date, faa has only special rules preventing this. we are pointing to the fact that 10 years from now when 60 to 70% of the fleet will be like the new aircraft we see today in terms of the dreamliner, there needs to be regulations and standards so that this does not become a special condition. emily: mark, you guys are constantly examining threats
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like this, how bad is this? how easy is best to do? mark: i agree with the doctor, the big issue is, as security professionals, we are concerned about technology to -- touching each other. so obviously there is a great concern when you think about the avionics of an airplane or the communications of an airplane being able to touch the same wi-fi or entertainment system that the in-flight passengers use. as the doctor said, while they may be contacted with firewalls or other devices, those are regularly defeated by bad guys. we have to get better about thinking about building security into these controls at the design phase. i posit that building security
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into the design in and aircraft is just as important as building safety and efficiency features into the aircraft. the world has changed. as things are more and more ip-enabled, we have to think about this from a security perspective just as much as a safety perspective. emily: planes that could be affected, the boeing dreamliner, gerald, which first finish -- which percentage are we talking about being affected here? i heard planes newer than 20 years? aren't most newer? >> we do not have a count. i would not say that most planes are newer than 20 years old. i would say that the fleet is being renewed. what is important now, as was said, to build insecurity and -- to build in security and build
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in cyber. that is what we are talking about. the older fleet had more separate controls, and not as many points of potential contacts across the systems. a third of those are ip-based. so, like, going forward, it but will be 50-60% i the end of the decade. that was the point of our report, not to cause concern among the public that this was an imminent danger, but to point out that cyber security challenges change every day. the faa must not only build security even, but constantly be monitoring it, because the threat changes every day and you need to be one step ahead. that was the basic point of our report. emily: in the worst case, you are saying a hacker could commandeer the system, mark, worst-case scenario, but a --
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could a hacker bring a plane down? could a hacker fly a plane into a building? mark: that is the worst case. i do not think anyone is predicting that. that is certainly be concerned we have. we need to keep the controls separate. the systems separate so that that potential does not exist. you know, when you think about this, when you have a wi-fi network unconnected -- connected to an aircraft it is just like a wi-fi anywhere else. you know, you could potentially have bad guys on an airplane that could compromise the wi-fi network on the airplane itself. keeping these -- segmenting these networks is incredibly important. emily: up next, another crash
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landing for spacex this week. we discussed just how difficult elon musk's rocket-catching plan actually is. ♪
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emily: i am emily chang and this is the best of "bloomberg west." close but no cigar for spacex. the elon musk company successfully launched a rocket into space, but they fell short of the goal. elon musk live tweeted the the rocket landed on the drone ship, but too hard for survival. it looks like falcon landed, but it tipped over.
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i spoke to lori garver and washington about what is next. lori: well, people have been trying to take advantage of the reusability of rockets for decades, and i think this is so incredibly close that we will be able to see this happen in one of the next couple of launches. i cannot speculate anymore than elon has. the fact that now twice in a row, they have found the drone ship and been able to land on it, too hard for survival is still a success. let's not forget the rocket itself has launched successfully and it will be docking with the international space station on friday. emily: in case anyone is worried about elon musk, he tweeted he
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would treat himself to a volcano lair if it worked. >> remind me of my excess lateral velocity. emily: go crawl into your volcano lair. corey: everyone should get a volcano. it is a dry heat. for all of the things elon musk has done, this is an enormously ambitious thing. it is important for the government to have a u.s. space company. with nasa out of the game, there are in or miss payloads of military and spies of things that have nowhere to go. it is important for this country to have this. inasmuch as it is possible for this country to have those spy satellites. emily: lori, what kind of oversight is necessary to make sure this is safe? lori: this is very similar to
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how we have been going into space for years. i take issue with nasa out of the game. nasa is not out of the game. they are in the game. five years ago, president obama stood at the kennedy space center and outlined this new way of partnering with the private sector to advance space transportation. we would be spending much too much money and no one would be going if we throw away the engines and an airplane every time we flew and we cannot he doing that and space transportation either. the government has been utilizing the private sector to launch its satellite, yes, even though they are important military satellites as well as scientific payloads for decades. the space shuttle that was retired a few years ago was $3 billion-$4 billion a year and that has helped us to create the space station. now with the private sector
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being able to do it for pennies on the dollar, that is the right path. they will be caring people to the good usa shores and just a couple years. emily: give us a better idea of what he is grappling with here. what kind of technology is necessary to make it reusable and save money? lori: reusability has been a holy grail. we know that is what it takes to reduce the cost permanently and have sustained space activities. that will take more people and things to orbit. and, we at nassau have been working on it for more than 15 years, we have a different vehicle that would lead to a fully reusable vehicle but the investments are just too high. because the technology and propulsion were not advanced enough. the private sector is innovating
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to do this on a ship in the ocean because they cannot get the capability to get licenses to land on land. this is a great innovation. so, of course we reused the space shuttle engine that came back and refurbished them to fly again. at the space shuttle took a number of parts that were expendable, bus the cost continue to be too large to really be sustained for these long-term plans that we have in space. emily: if this will happen, do you think it is just a matter of time, how much time? lori: within the next year, elon will have landed spacex successfully, so starting that reusability, they have six launches now, they are in a 12 launch contract. to the space station. i think people will be going on competitors vehicles with boeing in the next couple of years.
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emily: lori garver in washington, and our bloomberg editor at large, corey johnson. coming up, house calls. will it help sprint and on to its edge over t-mobile? that is coming up next on the best of "bloomberg west." ♪
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emily: welcome back to the best of "bloomberg west," i am emily chang. sprint is making house calls and could deliver and set up a new smart phone inside your home. as competition heats up with t-mobile, it is trying to differentiate itself by bringing the in-store experience to homes or offices. i spoke with them about the deal and about how they tested this
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program before launching in kansas city this week area marcelo: we did this with a group of select customers in kansas city. we sent them an offer and they asked for direct to you and we had our trained experts go to their homes or offices and take them through the whole experience. it is a thorough experience. i don't know the last time you went to be store to buy a cell phone, but if you are switching carriers, it takes a long time if you are switching from one operating system to another. it can be painful to transfer contents, most people are not tech savvy. before we launched, i wanted to experience it myself. i went to a customer's home and
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the customer was delighted. when we felt the customers were delighted, we said let's announce it. we will do miami and chicago later. let's go nationwide by the end of this year. emily: you have an interesting story, as i understand it, you started by selling phones out of your car in college. you even made house calls. how did that in form this decision? marcelo: that was in 1996 when i was in a different company. we did something similar. back then it was different customers had never used a cell phone. so we had to take them through the whole experience. how do you make your first phone call? things have not changed that much. if you get your new smart phone, the amount of things you can do is a lot. so, a lot of customers do not want to order one online because
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when you go home and open up the box, you have an intimidating latest galaxy or iphone and it is not easy. basically, to transfer all of your contacts or your apps or your photos or videos. i have so many e-mails from customers telling us, i lost all of my pictures that i had in my phone. so we thought this would be a clever way to basically go to the customer's home and more importantly, it is delighting your customers. having the ability to go to their home and by the time they are done, i can tell you these are customers recommending sprint to everyone they know. emily: there seems to be a race to the bottom when it comes to different carriers, t-mobile has been pushing prices down. do customers care more about price or convenience? what kinds of phones are you selling the most of, higher end ones? marcelo: customers want to get the latest device.
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we realized that and we launched the first phone leasing, iphone for life, that gives you the ability to get a phone and every year you have the ability to get a new phone. you get a lot of people who have a two-year contract and the technology comes up once a year. imagine you sit in your home you have a one year lease on your phone and every year you change your phone and you go to an at, you click on your app and you say where you want the phone to be delivered, and you choose where and someone shows up and exchanges your phone. emily: sprint ceo, marcelo. coming up, a struggle to keep artisans happy. we will speak with etsy next on
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"bloomberg west." ♪
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emily: this is the best of "bloomberg west," i am emily chang. wall street may have high hopes for etsy. raising 267 million dollars of its public offering. it is pricing at $16 a share. many of the artisans are not so thrilled. leslie pickel visited some bloomberg news ipo reporter merchants to find out why. ♪ leslie: stuffed owls dressed like hipsters are rebecca's thing. she spends five hours of sewing and decorating each one by hand.
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she sells them for $50 a piece on etsy. rebecca: it was the perfect platform, they were doing their part to elevate the experience of handmade. leslie: that is until etsy became more corporate. it allows sales to slip. the new policy has made it harder for consumers to find her pillows and compete. leslie: why not use a manufacturer to compete? rebecca: the sellers have connections to their pieces. at the end of the day, it is a
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business. leslie: it was founded five years ago. a copy attention of big-name venture capitalists. over time, success bred conflict, they rejected any stray from the company core values. now, at sea is going public. and the new policies could help it be more track of 2 wall st. it charges $.20 for each listing. they declined to comment on the policy changes. if these changes are common, in the lead up to a public offering. even if it means offending customers. >> companies need to evolve. those that do not, will be left behind. in a world that changes around
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them, and when they check out their market the trick is to do it in a gradual way, or way that does not offend your original base. if a company changes to quickly, it could have a negative impact on the current customer base. that will show up in the margins. leslie: as a team meet up, sellers have mixed reactions to the ipo. some say this is just part of the price you pay for being part of a larger ecosystem. rick left the site when the changes were announced. rick: for a site that claims to empower crafters, i did not feel it was doing that. leslie: some see it as an opportunity. they have started a campaign to build $1.5 million and get a stake in the ipo. emily: our ipo reporter, leslie pickel. that does it for this edition of the best of "bloomberg west." you can watch our regular show
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monday through friday. catch you later. ♪
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